Offshore Investors should have Australian property on their radar – Queensland in particular

BRISBANE, 2 September – Australia’s third largest state Queensland, and it’s capital Brisbane, have not typically been on the radar of offshore investors in the past, but strong growth prospects suggest that they should be, according to a Jones Lang LaSalle research paper.

The White Paper entitled, “Queensland Investment Case: Why Queensland? Why Now?” argues that Queensland has significantly outperformed the larger Australian states over the past few decades and is forecast to do so again over the next few decades.

“Queensland is currently 20% of Australia’s population and contributes 19% of Australian GDP. However, over the past decade, the state has contributed 30% of Australia’s population growth, 26% of Australia’s GDP growth and 29% of Australia’s employment growth,” said Director of International Investments, Simon Storry.

Jones Lang LaSalle’s Queensland Managing Director, Geoff McIntyre said, “But the important thing is that these figures are not the end of Queensland’s strong growth story and the state is forecast to again significantly outperform national economic growth, population growth and employment growth trends over the next decade.

“While the Queensland economy is diverse and largely reflects the national industrial structure, there is no question that investment in resources growth will be a powerful impetus to the state’s economy over the next decade and a key driver of both employment growth and population growth,” he said.

“The state’s largest merchandise export is coal and the state’s large and high-quality deposits of coal make it a major global export source. This sector has benefited from very strong demand out of emerging Asia, and China in particular, which is driving a further ramp up in investment in the sector.”

“However, it is the potential of the liquefied natural gas industry in Queensland that is expected to be a particularly large boost to the state over the next decade. There is currently between AUD 70 and 100 billion dollars of investment planned across four major projects in this new industry for the state. Most of these projects are all in very advanced planning stage and awaiting environmental approval before the final investment decision is made,” Mr McIntyre said.

Mr Storry said, “There is no doubt that the economic and employment benefits of these projects will spread far beyond the direct investment made and that they will be a powerful impetus to the Queensland commercial property market.”

Mr Storry recently returned from an International Investor Briefing promoting Queensland opportunities. He said the briefing was well received, with a number of groups now recognising the need for greater diversification.

According to Queensland Research Director, Leigh Warner, the focus of local investors is on other Australian office markets at present that have stronger immediate term prospects, which is an opportunity for offshore investors to buy quality assets with less intense competition.

“Brisbane had a stronger upswing than most other market prior to the global financial crisis and consequently had a larger supply pipeline when the downturn hit. As a result, while the market has stabilised over the past six months, Brisbane does have a more subdued immediate outlook for the next 18 months,” explained Mr Warner.

“However, we think there are good counter-cyclical buying opportunities in Brisbane for investors to position themselves for both a medium-term cyclical upswing and the state’s undeniably strong long-term demand prospects.”

“The availability of well-leased quality new office stock from the recent strong construction cycle also adds to this opportunity for investors,” Mr Warner said.

He added that the Brisbane retail and industrial markets have both seen significant curtailing of new supply over the past 18 months and are well positioned to recover relatively quickly as occupier demand returns.

Bottom line – Queensland’s share of the pie is growing…

Mr McIntyre said, “Queensland’s economy and population will grow at a faster pace than that of New South Wales and Victoria over the next few decades and this will mean that Brisbane’s office stock should also grow at a faster pace than Sydney and Melbourne.”

“This should be seen as a very strong marker for the international investment community to look at the state in terms of their total investment in Australia, and increasing their exposure in this state.”

Mr McIntyre said similarly, it was logical that the yield differential between Brisbane and the larger markets should shrink over time.

“Brisbane’s office stock has grown relatively quickly over the past decade in line with strong economic growth. Since 1999, the Brisbane CBD office stock has grown 29%, while the Brisbane Fringe has grown by well over 50%. In contrast, the Sydney CBD office stock grew 10% and the Melbourne CBD grew 26%. Looking at the long-term trend, the Brisbane CBD was just 21% of the size of the Sydney CBD at the beginning of our data series in 1970, but it has now reached 43% in early 2010.

“The bottom line is that Queensland’s share of the pie – across key variables such as output, population, industrial production and employment – is growing and is likely to result in the eyes of the investment world coming to rest on Queensland as a key target for funds,” Mr McIntyre said.